David Kotok On Libya: "This Is Nowhere Near Over" And Being Fully Invested Right Now Is Insane

David Kotok of Cumberland
Advisors warns that the situation unfolding in North Africa
and the Mideast:

This is nowhere near over.

By “This”, we mean the regional contagion, spreading
violence and rising geopolitical risk in the Middle East and
North Africa. Reports say that Libya has
stopped producing oil and that pipeline delivery to Europe
(Italy) is interrupted. Libya seems headed for complete
dismemberment and full-blown civil war.
Note that China is evacuating 15,000 workers.
China! Imagine that we learn there are as many workers from
China in Libya as there are workers from Egypt.
Anyone still think this is a local idiosyncratic event.

We are watching a “sea change” occur among one tenth of the
world’s population and among the world’s low cost marginal
producers of the world’s energy. Scenarios with
benign outcomes and peaceful transitions appear remote.

Note how the region’s worst of the bad actors seize their
opportunities where they find them. Every success emboldens
them. A case study is Iran’s two ships transiting the
Suez. Also, note how the most suppressive regimes like
Syria, Iran, Saudi Arabia, Libya have learned how to suppress
social networks, cut off cell phones, block internet traffic and
reverse or alter the information flows.

The bottom line:

At Cumberland, our US ETF accounts are in the highest cash
position they have seen in over two years. We think being
full invested when there is a shooting war in a major oil
producing country is folly. There is one position that must
be maintained. We are high in energy
overweight. We are underweighted in consumer
discretionary exposure.